We can do something about inflation
by Keli'i Akina, Ph.D., President/CEO Grassroot Institute, June 18, 2022
Prices are going up everywhere, and Hawaii families and businesses are hurting as a result.
We see it at the gas pump, where motorists have to weigh the cost against their other bills, such as food, medical, housing or daycare. We see it at the grocery store, where the prices of even staples such as milk and eggs threaten to bust the family budget.
Of course, Hawaii prices have long been high, so much so that more than 22,000 residents have left the state since 2016 in search of lower prices and greater job opportunities.
But over the last two years, the most severe danger to our ohana has been inflation. From a rate of 1.9% in 2018, inflation jumped to 7.1% in 2021 and was 8.2% as of April 2022.
A report issued in May calculated that Hawaii prices have gone up by 10% since January 2021. For the average Hawaii household, that is $622 more per month — yes, per month — including $283 more in transportation and $83 more in food.
Naturally, as our grocery and gas prices have climbed higher, our anxiety and frustration also has been increasing. Many people are feeling helpless as their paychecks lose pace with rising costs. That desperation brings hard questions: When will it end? What can we do about it?
Policymakers, worried about the upcoming election, have tried to spread the blame, citing the coronavirus pandemic, the Russian invasion of Ukraine, supply-chain breakdowns, greedy corporations — anything that can’t be traced directly to their decisions.
However, the root cause of inflation is very simple: Officials in Washington, D.C., have been printing and spending too much money.
As Milton Friedman, one of the greatest economists of the 20th century, put it, inflation, “is always and everywhere, a result of too much money, of a more rapid increase in the quantity of money than [of] output.”
That is why many people have been nervous about the federal government’s recent unprecedented spending spree in response to the COVID-19 crisis. Indeed, a recent report from the Federal Reserve Bank of San Francisco placed much of the blame for our intensifying inflation on the massive federal spending programs justified as “COVID relief.”
The Fed, however, is not blameless. It is actually the great facilitator. Between March 2020 and March 2022, it added approximately $5.8 trillion to the money supply — nearly the same amount that had been added in the previous decade. The purpose of all this printing and spending might have been noble, but the chickens have come home to roost, with inflation on the verge of running rampant.
At this point, it might seem hopeless, since it is extremely difficult to change the policies that originate in Washington. However, while Hawaii lawmakers might not be able to hack at the root cause of our current inflationary spiral, there are some things they could do.
For example, some states have already passed temporary tax relief measures to lower the price of fuel in their states, including New York, Maryland, Georgia and Connecticut. Hawaii could join them. Motorists here are paying about 52 cents a gallon in taxes for both gasoline and diesel, and suspending those taxes would be a straightforward and effective way to help ease the pinch of inflation.
In fact, now is a good time to cut taxes across the board. Rather than use state and county budget surpluses as an excuse to keep spending, our state and county governments should tighten their belts — like the rest of us have been forced to do — and implement tax relief help to help us offset our increasing fuel, utility and grocery bills.
Hawaii lawmakers also could:
>> Cut regulations that discourage economic growth.
>> Reform the state’s restrictive occupational licensing laws so more people can find work.
>> Establish more regulatory “sandboxes,” such as the Digital Currency Innovation Lab, to reduce business costs and encourage entrepreneurship.
>> Reform land-use and homebuilding regulations to spur more housing supply and ease housing prices.
>> And much more.
Yes, inflation is a federal problem — and likely it won’t end until our federal representatives come to their senses, which I hope will be soon.
Nevertheless, there still is much our leaders in Hawaii could do to alleviate the pain that inflation is causing for Hawaii’s working families and businesses.
I only hope that they act quickly before more of our families, friends and neighbors are priced out of paradise.